Multinational executives and senior politicians have cautioned that Europe must reduce regulatory barriers to improve its competitiveness and make it easier for businesses to make green investments.
“Europe has a huge challenge and huge risk of deindustrialisation,” said Ilham Kadri, the CEO of Solvay, a chemicals multinational based in Belgium, in a panel on January 19 at the World Economic Forum (WEF) in Davos.
Discussion about European competitiveness comes on the heels of the US Inflation Reduction Act (IRA), a package approved last August which provides $369bn of incentives for US green investments. The sweeping US legislation has faced criticism from Japan and the EU, who worry it will lead businesses to invest in the US rather than Europe.
“The IRA is not the enemy, it is the best thing that could happen to Europe,” said Ms Kadri. “The question is what does it take for Europe to have a competitive industrial infrastructure and policies.”
Dutch prime minister Mark Rutte said at the WEF that while the IRA had some “unintended consequences” it was an opportunity for Europe to adapt its state aid rules and provide more subsidies for industry. In 2022, the US attracted $63.8bn worth of foreign renewable energy investment projects, exceeding the $43.6bn worth of projects across the whole of Western Europe, according to preliminary fDi Markets data up to November.
Mr Rutte's comments come shortly after news that Europe is preparing its own support package for cleantech and innovation to counter the US’s move to fast-track its energy transition.
The president of the European Commission, Ursula von der Leyen, said on January 17 that the EU is preparing green legislation which will accelerate permitting for new projects, loosen state aid rules and a sovereign fund to support research and strategic projects.
Ms Khadri noted that “permitting and the bureaucracy is too heavy” in Europe, remarking that it took her three years to get permitting in both Germany and France as part of Solvay’s plans to phase out coal by 2030.
Concerns about Europe’s competitiveness are echoed across the chemicals industry. Martin Brudermüller, the CEO of BASF, said at the end of 2022 that the company would have to “permanently” downsize in Europe due to higher energy prices.
“The European chemical market has been growing only weekly for about a decade. The significant increase in natural gas and electricity prices over the course of  is putting pressure on chemical value chains,” he said during an earning call last October.
Other industry executives have recently been candid with their plans to pivot away from Europe. German pharmaceutical firm Bayer plans to focus on its US and Chinese businesses and shift away from Europe, according to a report by the Financial Times on January 16.